Regulation of last resort: A presentation on ‘Thanks but no thanks: A new policy to reduct land conflict’ by Dufwenberg, Kohlin, Martinsson, and Medhin (2016)

Introduction

• Lack of well-defined property rights of land is an oft-cited reason for lackluster growth in Africa.

• Transition to well-defined land rights can be both costly and can induce conflict.

• Dufwenberg and colleagues (Dufwenberg et al. (2016)) examine whether a ‘credible threat’ of government resolution reduces incedences of land conflict.

Theory

• Two players choose simultaneously.
• Each player’s strategy set is \(\{0, 1, \cdots, T\}\), where \(T\) is the total amount of land available to allocate.
• If players contest land, the value of the land is decreased, such that

\[U(x_i, z) = v(x_i - z) + v \frac{z}{4}\\ z(x_i, x_{-i}) = \max \{x_i + x_{-i} - T, 0\}.\]

Here \(T = 4\) and \(v = 8\).

Policy

Either player may choose a new option \(D\): invoke the divider. The divider charges a fee \(t = 10\) that is shared between the players and allocates the land equally between the two. If neither player chooses \(D\), then they play the original game.

Policy game

Experiment

Compare behavior in games with and without the divider option, allowing participants to choose how much land they want to claim.

• 8 villages in the Amhara region of Ethiopia.
• land unit is a tilm. One hectare is equal to 30-40 tilms.
• randomly and anonymously matched in pairs.
• 2 sessions of 15 anonymous pairs for each of 2 treaments in 8 villages, 480 subjects total.

Experiment

Conclusions

• The credible threat of the Divider induces more cooperation, therefore offering detailed mapping and resolution at some cost may encourage negotiation instead, which is much less costly.

• Players do not fully forward induct, in that choosing 2 or 3 is not different than other options for those who did not choose D (H4).

Social Preference Literature

• Interdependent preferences and reciprocity (Sobel 2005).
• Fairness and retaliation: the economics of reciprocity (Ernst Fehr and Gächter 2000).
• The economics of fairness, reciprocity and altruism-experimental evidence and new theories (Ernst Fehr and Schmidt 2006).
• A theory of fairness, competition, and cooperation (E. Fehr and Schmidt 1999).
• Understanding social preferences with simple tests (Charness and Rabin 2002).
• ERC: A theory of equity, reciprocity, and competition (Bolton and Ockenfels 2000).